TO WHOMSOEVER IT MAY CONCERN

Basis

This is to confirm that we have reviewed the relevant available records & information
necessary for giving opinion on the Net Worth of KOREA NATIONAL RAILWAY
(hereinafter referred to as “KNR”) (previously called as KOREA RAIL NETWORK
AUTHORITY) having address at 242 Jungang-Ro, Dong Gu, Daejeon City 34618,
Republic of Korea as at December 31, 2018.

As informed to us:

- Korea National Railway (KNR) is the only quasi-governmental organization in

charge of construction and management of rail infrastructures in the Republic of
Korea and is organized as a state-owned enterprise under the Ministry of Land,
Infrastructure and Transport.

- KNR constructs conventional railways in Korea with 100% of the funds provided
by the government. In the case of high speed rails (Gyeongbu, Honam and Suseo
HSRs), projects are financed 40 to 50 percent by the government and 50 to 60
percent by KNR. KNR procures financing for HSR projects by issuing KNR bonds
in accordance with government policies and regulations. Such bonds are repaid
using the track access charges collected from operating companies (Korail and
SR) after the completed HSRs are opened for revenue services.

- KNR does not have any share capital and that the only sources of funding are
Government Grants and also the Bonds / Debentures used for financing these
projects in some cases

Opinion

We are of the Opinion that since KNR is a Quasi-Judicial organization (Government

Owned Agency) without having any share capital and that since the same is
functioning with limited commercial purpose, the Net Worth criteria should not be
applied uniformly in the manner in which it is usually applied on any General
Purpose Financial Statements.

In case the Net Worth criteria is to be applied for the purpose arriving at the worth of
such Quasi-Judicial Government organization, then, it may be prudent to adjust the
existence of Debentures / Bonds in the financials. This may be linked to the below
reasons:

- In case of presence of any difficulty in repayments, the relevant financial aid will
be provided by Korean Government. This draws support from Addendum
(Legislation No. 6956, 29 July 2003) to the Korea National Railway Act which
stipulates that the government ensures aid with the repayment if there is
deficiency of funds at the time of repayment or by taking measures to protect the
creditors.
- Accordingly, these debentures only reflects the liabilities and interest costs of the
bonds issued for construction of the HSRs and hence have no relation to the
financial condition of the entity.

In addition to the above, due adjustment for the Government Grants may also be
done. The entity being a non-stock entity records all the sums received from the
Korean Government towards the Project as Grants instead of Recording them as
Share Capital. It is important to highlight that the Annual Report of KNR till 2012
specified a significant sum of amount received from the Korean Government as
Share Capital (amounting to US Dollars 39,99,082 Thousands as at December 31,
2012 towards the basic capital).

It is from 2013 when the IFRS was introduced that this amount got reclassified as
Government Grant in the Financials.

Basis for Opinion

- According to Article 20 of the Framework Act on Rail Road Industry

Development, the Korean Government established KNR by a Special Act as an
executing body to systematically and efficiently carry out the duties relating to
railroad facilities by merging and consolidating the relevant organizations of the
Korea National Railroad and the Korea High-Speed Rail Construction Authority.

- As per the audited financial report for year ending December 31, 2018, KNR was
established through the Korea National Railway Act. For this purpose, the Korea
Train Express was dissolved on December 31, 2003.

- As per the rating issued by the Moody’s on May 13, 2020, KNR (formerly known
as KRNA) is a Government Agency which is granted a very limited autonomy and
exists only with little commercial purpose.

- Korea National Railway Act stipulates that the government ensures aid with the
repayment if there is deficiency of funds at the time of repayment or by taking
measures to protect the creditors.

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- We also have email confirmation from associate CPA firm in South Korea
regarding non-existence of any specific basis for calculation of networth for Quasi
Judicial Government Organization which does not have any Share Capital.

- The Annual Report Extract of the entity for 2012 which shows existence of
Capital in the financial statements.

- The Annual Report Extract of the entity for 2013 which shows Nil Share Capital
due to its restatement to another account balance on account of introduction of
International Financial Reporting Standards in the financial statements.

For V V Kale and Company,

Chartered Accountants

Vijay Kale
M.No: 080821

Place: New Delhi

Date: November 11, 2020
UDIN: 20080821AAAAZN1124

Enc:

1. Credit Rating from Moody’s,